msft-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the Quarterly Period Ended March 31, 2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the Transition Period From to

Commission File Number 001-37845

MICROSOFT CORPORATION

Washington		91-1144442
(STATE OF INCORPORATION)		(I.R.S. ID)

ONE MICROSOFT WAY, REDMOND, Washington 98052-6399

(425 ) 882-8080

www.microsoft.com/investor


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered

Common stock, $0.00000625 par value per share	MSFT	Nasdaq
3.125% Notes due 2028	MSFT	Nasdaq
2.625% Notes due 2033	MSFT	Nasdaq

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of April 21, 2022


Common Stock, $0.00000625 par value per share		7,479,033,135 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended March 31, 2022

INDEX

				Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		a)	Income Statements for the Three and Nine Months Ended March 31, 2022 and 2021	3

		b)	Comprehensive Income Statements for the Three and Nine Months Ended March 31, 2022 and 2021	4

		c)	Balance Sheets as of March 31, 2022 and June 30, 2021	5

		d)	Cash Flows Statements for the Three and Nine Months Ended March 31, 2022 and 2021	6

		e)	Stockholders’ Equity Statements for the Three and Nine Months Ended March 31, 2022 and 2021	7

		f)	Notes to Financial Statements	8

		g)	Report of Independent Registered Public Accounting Firm	32

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		51

	Item 4.	Controls and Procedures		51

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		52

	Item 1A.	Risk Factors		52

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		66

	Item 6.	Exhibits		67

SIGNATURE				68

PART I

Item 1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)	Three Months Ended March 31,						Nine Months Ended March 31,


	2022			2021			2022	2021

Revenue:
Product	$	17,366		$	16,873	$	54,776	$	52,136
Service and other		31,994			24,833		91,629		69,800


Total revenue		49,360			41,706		146,405		121,936


Cost of revenue:
Product		4,584			4,277		14,707		13,932
Service and other		11,031			8,768		31,514		24,309


Total cost of revenue		15,615			13,045		46,221		38,241


Gross margin		33,745			28,661		100,184		83,695
Research and development		6,306			5,204		17,663		15,029
Sales and marketing		5,595			5,082		15,521		14,260
General and administrative		1,480			1,327		4,151		3,585


Operating income		20,364			17,048		62,849		50,821
Other income (expense), net		(174	)		188		380		876


Income before income taxes		20,190			17,236		63,229		51,697
Provision for income taxes		3,462			1,779		7,231		6,884


Net income	$	16,728		$	15,457	$	55,998	$	44,813


Earnings per share:
Basic	$	2.23		$	2.05	$	7.46	$	5.93
Diluted	$	2.22		$	2.03	$	7.41	$	5.88

Weighted average shares outstanding:
Basic		7,493			7,539		7,504		7,554
Diluted		7,534			7,597		7,552		7,617

Refer to accompanying notes.

PART I

Item 1

COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)	Three Months Ended March 31,							Nine Months Ended March 31,


	2022			2021				2022			2021

Net income	$	16,728		$	15,457		$	55,998		$	44,813


Other comprehensive income (loss), net of tax:
Net change related to derivatives		6			18			8			30
Net change related to investments		(2,882	)		(1,705	)		(4,047	)		(2,398	)
Translation adjustments and other		(37	)		(218	)		(259	)		634


Other comprehensive loss		(2,913	)		(1,905	)		(4,298	)		(1,734	)


Comprehensive income	$	13,815		$	13,552		$	51,700		$	43,079

Refer to accompanying notes.

PART I

Item 1

BALANCE SHEETS

(In millions) (Unaudited)


	March 31, 2022			June 30, 2021

Assets
Current assets:
Cash and cash equivalents	$	12,498		$	14,224
Short-term investments		92,195			116,110


Total cash, cash equivalents, and short-term investments		104,693			130,334
Accounts receivable, net of allowance for doubtful accounts of $ 505 and $751		32,613			38,043
Inventories		3,296			2,636
Other current assets		13,320			13,393


Total current assets		153,922			184,406
Property and equipment, net of accumulated depreciation of $ 58,053 and $51,351		70,298			59,715
Operating lease right-of-use assets		12,916			11,088
Equity investments		6,907			5,984
Goodwill		67,371			49,711
Intangible assets, net		11,348			7,800
Other long-term assets		21,845			15,075


Total assets	$	344,607		$	333,779


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,085		$	15,163
Current portion of long-term debt		1,749			8,072
Accrued compensation		9,067			10,057
Short-term income taxes		4,646			2,174
Short-term unearned revenue		34,027			41,525
Other current liabilities		11,865			11,666


Total current liabilities		77,439			88,657
Long-term debt		48,177			50,074
Long-term income taxes		26,483			27,190
Long-term unearned revenue		2,769			2,616
Deferred income taxes		304			198
Operating lease liabilities		11,357			9,629
Other long-term liabilities		15,154			13,427


Total liabilities		181,683			191,791


Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000 ; outstanding 7,483 and 7,519		85,767			83,111
Retained earnings		79,633			57,055
Accumulated other comprehensive income (loss)		(2,476	)		1,822


Total stockholders’ equity		162,924			141,988


Total liabilities and stockholders’ equity	$	344,607		$	333,779

Refer to accompanying notes.

PART I

Item 1

CASH FLOWS STATEMENTS

(In millions) (Unaudited)	Three Months Ended March 31,							Nine Months Ended March 31,


		2022			2021			2022			2021

Operations
Net income	$	16,728		$	15,457		$	55,998		$	44,813
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other		3,773			2,936			10,481			8,342
Stock-based compensation expense		1,906			1,525			5,505			4,547
Net recognized losses (gains) on investments and derivatives		105			(351	)		(566	)		(833	)
Deferred income taxes		(198	)		(88	)		(5,985	)		(116	)
Changes in operating assets and liabilities:
Accounts receivable		857			290			5,800			5,125
Inventories		(279	)		(329	)		(662	)		(349	)
Other current assets		91			478			1,861			1,154
Other long-term assets		(724	)		(885	)		(2,230	)		(2,446	)
Accounts payable		520			833			284			1,181
Unearned revenue		(209	)		(473	)		(7,437	)		(6,764	)
Income taxes		1,091			1,074			1,687			(2,277	)
Other current liabilities		1,287			1,590			(1,111	)		394
Other long-term liabilities		438			122			781			1,259


Net cash from operations		25,386			22,179			64,406			54,030


Financing
Cash premium on debt exchange		0			(1,754	)		0			(1,754	)
Repayments of debt		(4,197	)		(500	)		(9,023	)		(3,750	)
Common stock issued		477			396			1,380			1,243
Common stock repurchased		(8,822	)		(6,930	)		(23,939	)		(20,208	)
Common stock cash dividends paid		(4,645	)		(4,221	)		(13,503	)		(12,307	)
Other, net		(158	)		(183	)		(522	)		(339	)


Net cash used in financing		(17,345	)		(13,192	)		(45,607	)		(37,115	)


Investing
Additions to property and equipment		(5,340	)		(5,089	)		(17,015	)		(14,170	)
Acquisition of companies, net of cash acquired, and purchases of intangible and other assets		(18,719	)		(7,512	)		(20,775	)		(8,408	)
Purchases of investments		(8,723	)		(18,375	)		(21,537	)		(48,047	)
Maturities of investments		1,099			15,016			15,214			44,546
Sales of investments		16,693			5,876			25,218			10,711
Other, net		(1,181	)		400			(1,687	)		(1,356	)


Net cash used in investing		(16,171	)		(9,684	)		(20,582	)		(16,724	)


Effect of foreign exchange rates on cash and cash equivalents		24			(33	)		57			(65	)


Net change in cash and cash equivalents		(8,106	)		(730	)		(1,726	)		126
Cash and cash equivalents, beginning of period		20,604			14,432			14,224			13,576


Cash and cash equivalents, end of period	$	12,498		$	13,702		$	12,498		$	13,702

Refer to accompanying notes.

PART I

Item 1

STOCKHOLDERS’ EQUITY STATEMENTS

(In millions, except per share amounts) (Unaudited)	Three Months Ended March 31,							Nine Months Ended March 31,


	2022			2021				2022			2021

Common stock and paid-in capital
Balance, beginning of period	$	84,528		$	81,896		$	83,111		$	80,552
Common stock issued		477			396			1,380			1,513
Common stock repurchased		(1,313	)		(1,528	)		(4,401	)		(4,322	)
Stock-based compensation expense		1,906			1,525			5,505			4,547
Other, net		169			19			172			18


Balance, end of period		85,767			82,308			85,767			82,308


Retained earnings
Balance, beginning of period		75,045			44,973			57,055			34,566
Net income		16,728			15,457			55,998			44,813
Common stock cash dividends		(4,634	)		(4,214	)		(13,931	)		(12,665	)
Common stock repurchased		(7,506	)		(5,481	)		(19,489	)		(15,947	)
Cumulative effect of accounting changes		0			0			0			(32	)


Balance, end of period		79,633			50,735			79,633			50,735


Accumulated other comprehensive income (loss)
Balance, beginning of period		437			3,367			1,822			3,186
Other comprehensive loss		(2,913	)		(1,905	)		(4,298	)		(1,734	)
Cumulative effect of accounting changes		0			0			0			10


Balance, end of period		(2,476	)		1,462			(2,476	)		1,462


Total stockholders’ equity	$	162,924		$	134,505		$	162,924		$	134,505


Cash dividends declared per common share	$	0.62		$	0.56		$	1.86		$	1.68

Refer to accompanying notes.

PART I

Item 1

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — ACCOUNTING POLICIES

Accounting Principles

Our unaudited interim consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Microsoft Corporation fiscal year 2021 Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on July 29, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated.

Estimates and Assumptions

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price (“SSP”) of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; product warranties; the fair value of and/or potential impairment of goodwill and intangible assets for our reporting units; product life cycles; useful lives of our tangible and intangible assets; allowances for doubtful accounts; the market value of, and demand for, our inventory; stock-based compensation forfeiture rates; when technological feasibility is achieved for our products; the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns; and determining the timing and amount of impairments for investments. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to COVID-19.

Financial Instruments

Investments

We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

PART I

Item 1

Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). We perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense), net.

Derivatives

Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

For derivative instruments designated as fair value hedges, gains and losses are recognized in other income (expense), net with offsetting gains and losses on the hedged items. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in other income (expense), net with the corresponding hedged item. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net.

Fair Value Measurements

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

•

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets. Our Level 1 investments include U.S. government securities, common and preferred stock, and mutual funds. Our Level 1 derivative assets and liabilities include those actively traded on exchanges.

•

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies. Our Level 2 investments include commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities. Our Level 2 derivative assets and liabilities include certain over-the-counter forward, option, and swap contracts.

•

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Our Level 3 assets and liabilities include investments in corporate notes and bonds, municipal securities, and goodwill and intangible assets, when they are recorded at fair value due to an impairment charge. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

We measure equity investments without readily determinable fair values on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.

Contract Balances and Other Receivables

As of March 31, 2022 and June 30, 2021, other receivables due from suppliers were $1.0 billion and $ 965 million, respectively, and are included in accounts receivable, net in our consolidated balance sheets.

PART I

Item 1

As of March 31, 2022 and June 30, 2021, long-term accounts receivable, net of allowance for doubtful accounts, was $3.6 billion and $3.4 billion, respectively, and is included in other long-term assets in our consolidated balance sheets.

We record financing receivables when we offer certain of our customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. As of March 31, 2022 and June 30, 2021, our financing receivables, net were $2.4 billion and $ 4.4 billion, respectively, for short-term and long-term financing receivables, which are included in other current assets and other long-term assets in our consolidated balance sheets. We record an allowance to cover expected losses based on troubled accounts, historical experience, and other currently available evidence.

Recent Accounting Guidance

Accounting for Income Taxes

In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We adopted the standard effective July 1, 2021. Adoption of the standard did not have a material impact on our consolidated financial statements.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.

The components of basic and diluted EPS were as follows:

(In millions, except earnings per share)	Three Months Ended March 31,					Nine Months Ended March 31,


	2022		2021			2022		2021

Net income available for common shareholders (A)	$	16,728	$	15,457	$	55,998	$	44,813


Weighted average outstanding shares of common stock (B)		7,493		7,539		7,504		7,554
Dilutive effect of stock-based awards		41		58		48		63


Common stock and common stock equivalents (C)		7,534		7,597		7,552		7,617


Earnings Per Share

Basic (A/B)	$	2.23	$	2.05	$	7.46	$	5.93
Diluted (A/C)	$	2.22	$	2.03	$	7.41	$	5.88

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

PART I

Item 1

NOTE 3 — OTHER INCOME (EXPENSE), NET

The components of other income (expense), net were as follows:

(In millions)		Three Months Ended March 31,						Nine Months Ended March 31,


	2022			2021				2022			2021

Interest and dividends income	$	519		$	519		$	1,542		$	1,634
Interest expense		(503	)		(633	)		(1,567	)		(1,793	)
Net recognized gains (losses) on investments		(76	)		353			595			837
Net losses on derivatives		(29	)		(2	)		(29	)		(4	)
Net gains (losses) on foreign currency remeasurements		(74	)		(55	)		(152	)		126
Other, net		(11	)		6			(9	)		76


Total	$	(174	)	$	188		$	380		$	876

Net Recognized Gains (Losses) on Investments

Net recognized gains (losses) on debt investments were as follows:

(In millions)		Three Months Ended March 31,						Nine Months Ended March 31,


	2022			2021				2022			2021

Realized gains from sales of available-for-sale securities	$	119		$	33		$	150		$	84
Realized losses from sales of available-for-sale securities		(89	)		(12	)		(102	)		(30	)
Impairments and allowance for credit losses		(45	)		(10	)		(53	)		(7	)


Total	$	(15	)	$	11		$	(5	)	$	47

Net recognized gains (losses) on equity investments were as follows:

(In millions)		Three Months Ended March 31,					Nine Months Ended March 31,


	2022			2021			2022			2021

Net realized gains (losses) on investments sold	$	(22	)	$	43	$	46		$	76
Net unrealized gains (losses) on investments still held		(34	)		299		559			725
Impairments of investments		(5	)		0		(5	)		(11	)


Total	$	(61	)	$	342	$	600		$	790

PART I

Item 1

NOTE 4 — INVESTMENTS

Investment Components

The components of investments were as follows:

(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity Investments


March 31, 2022

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	883	$	0	$	0		$	883	$	802	$	81	$	0
Certificates of deposit	Level 2		3,045		0		0			3,045		3,003		42		0
U.S. government securities	Level 1		79,211		347		(1,174	)		78,384		3		78,381		0
U.S. agency securities	Level 2		417		0		(6	)		411		0		411		0
Foreign government bonds	Level 2		508		3		(10	)		501		0		501		0
Mortgage- and asset-backed securities	Level 2		602		2		(14	)		590		0		590		0
Corporate notes and bonds	Level 2		11,910		31		(277	)		11,664		0		11,664		0
Corporate notes and bonds	Level 3		45		0		0			45		0		45		0
Municipal securities	Level 2		324		34		(7	)		351		0		351		0
Municipal securities	Level 3		103		0		(7	)		96		0		96		0


Total debt investments		$	97,048	$	417	$	(1,495	)	$	95,970	$	3,808	$	92,162	$	0


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	1,857	$	1,234	$	0	$	623
Equity investments	Other									6,284		0		0		6,284


Total equity investments									$	8,141	$	1,234	$	0	$	6,907


Cash									$	7,456	$	7,456	$	0	$	0
Derivatives, net^(a)										33		0		33		0


Total									$	111,600	$	12,498	$	92,195	$	6,907

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(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity Investments


June 30, 2021

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	4,316	$	0	$	0		$	4,316	$	1,331	$	2,985	$	0
Certificates of deposit	Level 2		3,615		0		0			3,615		2,920		695		0
U.S. government securities	Level 1		90,664		3,832		(111	)		94,385		1,500		92,885		0
U.S. agency securities	Level 2		807		2		0			809		0		809		0
Foreign government bonds	Level 2		6,213		9		(2	)		6,220		225		5,995		0
Mortgage- and asset-backed securities	Level 2		3,442		22		(6	)		3,458		0		3,458		0
Corporate notes and bonds	Level 2		8,443		249		(9	)		8,683		0		8,683		0
Corporate notes and bonds	Level 3		63		0		0			63		0		63		0
Municipal securities	Level 2		308		63		0			371		0		371		0
Municipal securities	Level 3		95		0		(7	)		88		0		88		0


Total debt investments		$	117,966	$	4,177	$	(135	)	$	122,008	$	5,976	$	116,032	$	0


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	1,582	$	976	$	0	$	606
Equity investments	Other									5,378		0		0		5,378


Total equity investments									$	6,960	$	976	$	0	$	5,984


Cash									$	7,272	$	7,272	$	0	$	0
Derivatives, net^(a)										78		0		78		0


Total									$	136,318	$	14,224	$	116,110	$	5,984

(a)	Refer to Note 5 – Derivatives for further information on the fair value of our derivative instruments.

Equity investments presented as “Other” in the tables above include investments without readily determinable fair values measured using the equity method or measured at cost with adjustments for observable changes in price or impairments, and investments measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. As of March 31, 2022 and June 30, 2021, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $3.8 billion and $ 3.3 billion, respectively.

Unrealized Losses on Debt Investments

Debt investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:

	Less than 12 Months					12 Months or Greater								Total Unrealized Losses


(In millions)		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Total Fair Value


March 31, 2022

U.S. government and agency securities	$	35,798	$	(918	)	$	2,308	$	(262	)	$	38,106	$	(1,180	)
Foreign government bonds		419		(6	)		30		(4	)		449		(10	)
Mortgage- and asset-backed securities		450		(13	)		33		(1	)		483		(14	)
Corporate notes and bonds		8,133		(241	)		461		(36	)		8,594		(277	)
Municipal securities		125		(7	)		57		(7	)		182		(14	)


Total	$	44,925	$	(1,185	)	$	2,889	$	(310	)	$	47,814	$	(1,495	)

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	Less than 12 Months					12 Months or Greater								Total Unrealized Losses


(In millions)		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Total Fair Value


June 30, 2021

U.S. government and agency securities	$	5,294	$	(111	)	$	0	$	0		$	5,294	$	(111	)
Foreign government bonds		3,148		(1	)		5		(1	)		3,153		(2	)
Mortgage- and asset-backed securities		1,211		(5	)		87		(1	)		1,298		(6	)
Corporate notes and bonds		1,678		(8	)		34		(1	)		1,712		(9	)
Municipal securities		58		(7	)		1		0			59		(7	)


Total	$	11,389	$	(132	)	$	127	$	(3	)	$	11,516	$	(135	)

Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence.

Debt Investment Maturities

(In millions)	Adjusted Cost Basis		Estimated Fair Value


March 31, 2022

Due in one year or less	$	20,401	$	20,496
Due after one year through five years		56,463		56,076
Due after five years through 10 years		18,807		18,049
Due after 10 years		1,377		1,349


Total	$	97,048	$	95,970

NOTE 5 — DERIVATIVES

We use derivative instruments to manage risks related to foreign currencies, interest rates, equity prices, and credit; to enhance investment returns; and to facilitate portfolio diversification. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Foreign Currencies

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures daily to maximize the economic effectiveness of our foreign currency hedge positions.

Foreign currency risks related to certain non-U.S. dollar-denominated investments are hedged using foreign exchange forward contracts that are designated as fair value hedging instruments. Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments.

Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures.

Interest Rate

Interest rate risks related to certain fixed-rate debt are hedged using interest rate swaps that are designated as fair value hedging instruments to effectively convert the fixed interest rates to floating interest rates.

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Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. We manage the average maturity of our fixed-income portfolio to achieve economic returns that correlate to certain broad-based fixed-income indices using exchange-traded option and futures contracts and over-the-counter swap and option contracts. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Equity

Securities held in our equity investments portfolio are subject to market price risk. At times, we may hold options, futures, and swap contracts. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Credit

Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We use credit default swap contracts to manage credit exposures relative to broad-based indices and to facilitate portfolio diversification. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Credit-Risk-Related Contingent Features

Certain of our counterparty agreements for derivative instruments contain provisions that require our issued and outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of $1.0 billion. To the extent we fail to meet these requirements, we will be required to post collateral, similar to the standard convention related to over-the-counter derivatives. As of March 31, 2022, our long-term unsecured debt rating was AAA , and cash investments were in excess of $1.0 billion. As a result, no collateral was required to be posted.

The following table presents the notional amounts of our outstanding derivative instruments measured in U.S. dollar equivalents:

(In millions)	March 31, 2022		June 30, 2021


Designated as Hedging Instruments

Foreign exchange contracts purchased	$	635	$	635
Foreign exchange contracts sold		0		6,081
Interest rate contracts purchased		1,160		1,247

Not Designated as Hedging Instruments

Foreign exchange contracts purchased		8,151		14,223
Foreign exchange contracts sold		13,929		23,391
Other contracts purchased		2,757		2,456
Other contracts sold		869		763

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Fair Values of Derivative Instruments

The following table presents our derivative instruments:

	Derivative				Derivative		Derivative			Derivative
(In millions)	Assets				Liabilities		Assets			Liabilities


	March 31, 2022						June 30, 2021

Designated as Hedging Instruments

Foreign exchange contracts	$	0		$	(39	)	$	76		$	(8	)
Interest rate contracts		0			(43	)		40			0

Not Designated as Hedging Instruments

Foreign exchange contracts		234			(322	)		227			(291	)
Other contracts		96			(25	)		56			(36	)


Gross amounts of derivatives		330			(429	)		399			(335	)
Gross amounts of derivatives offset in the balance sheet		(175	)		177			(141	)		142
Cash collateral received		0			(175	)		0			(42	)


Net amounts of derivatives	$	155		$	(427	)	$	258		$	(235	)


Reported as

Short-term investments	$	33		$	0		$	78		$	0
Other current assets		167			0			137			0
Other long-term assets		(45	)		0			43			0
Other current liabilities		0			(311	)		0			(182	)
Other long-term liabilities		0			(116	)		0			(53	)


Total	$	155		$	(427	)	$	258		$	(235	)

Gross derivative assets and liabilities subject to legally enforceable master netting agreements for which we have elected to offset were $314 million and $426 million, respectively, as of March 31, 2022, and $395 million and $ 335 million, respectively, as of June 30, 2021.

The following table presents the fair value of our derivatives instruments on a gross basis:

(In millions)	Level 1			Level 2		Level 3		Total


March 31, 2022

Derivative assets	$	0	$	314		$	16	$	330
Derivative liabilities		0		(429	)		0		(429	)

June 30, 2021

Derivative assets		0		396			3		399
Derivative liabilities		0		(335	)		0		(335	)

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Gains (losses) on derivative instruments recognized in other income (expense), net were as follows:

(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


		2022			2021			2022			2021

Designated as Fair Value Hedging Instruments

Foreign exchange contracts
Derivatives	$	0		$	482		$	49		$	189
Hedged items		0			(474	)		(50	)		(181	)
Excluded from effectiveness assessment		0			7			4			25

Interest rate contracts
Derivatives		(57	)		(41	)		(71	)		(50	)
Hedged items		61			46			83			62

Designated as Cash Flow Hedging Instruments

Foreign exchange contracts
Amount reclassified from accumulated other comprehensive income		(15	)		(26	)		(44	)		15

Not Designated as Hedging Instruments

Foreign exchange contracts		35			(130	)		308			67
Other contracts		(29	)		(17	)		(41	)		(10	)

Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows:

(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


	2022			2021				2022			2021

Designated as Cash Flow Hedging Instruments

Foreign exchange contracts
Included in effectiveness assessment	$	(6	)	$	(2	)	$	(27	)	$	43

NOTE 6 — INVENTORIES

The components of inventories were as follows:

(In millions)


	March 31, 2022		June 30, 2021

Raw materials	$	1,369	$	1,190
Work in process		87		79
Finished goods		1,840		1,367


Total	$	3,296	$	2,636

NOTE 7 — BUSINESS COMBINATIONS

Nuance Communications, Inc.

On March 4, 2022, we completed our acquisition of Nuance Communications, Inc. (“Nuance”) for a total purchase price of $18.8 billion, consisting primarily of cash. Nuance is a cloud and artificial intelligence (“AI”) software provider with healthcare and enterprise AI experience, and the acquisition will build on our industry-specific cloud offerings. The financial results of Nuance have been included in our consolidated financial statements since the date of the acquisition. Nuance is reported as part of our Intelligent Cloud segment.

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The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:

(In millions)


Goodwill ^(a)	$	16,295
Intangible assets		4,340
Other assets		29
Other liabilities ^(b)		(1,897	)


Total	$	18,767

(a)	Goodwill was assigned to our Intelligent Cloud segment and was primarily attributed to increased synergies that are expected to be achieved from the integration of Nuance. None of the goodwill is expected to be deductible for income tax purposes.

(b)

Includes $986 million of convertible senior notes issued by Nuance in 2015 and 2017, of which $947 million was redeemed prior to March 31, 2022. The remaining $39 million of notes are redeemable through their respective maturity dates and are included in other current liabilities on our consolidated balance sheets as of March 31, 2022.

Following are the details of the purchase price allocated to the intangible assets acquired:

(In millions, except average life)	Amount			Weighted Average Life


Customer-related	$	2,560	9 years
Technology-based		1,560	4 years
Marketing-related		220	4 years


Total	$	4,340	7 years

ZeniMax Media Inc.

On March 9, 2021, we completed our acquisition of ZeniMax Media Inc. (“ZeniMax”), the parent company of Bethesda Softworks LLC (“Bethesda”), for a total purchase price of $8.1 billion, consisting primarily of cash. The purchase price included $766 million of cash and cash equivalents acquired. Bethesda is one of the largest, privately held game developers and publishers in the world, and brings a broad portfolio of games, technology, and talent to Xbox. The financial results of ZeniMax have been included in our consolidated financial statements since the date of the acquisition. ZeniMax is reported as part of our More Personal Computing segment.

The allocation of the purchase price to goodwill was completed as of December 31, 2021. The major classes of assets and liabilities to which we have allocated the purchase price were as follows:

(In millions)


Cash and cash equivalents	$	766
Goodwill		5,510
Intangible assets		1,968
Other assets		121
Other liabilities		(244	)


Total	$	8,121

Goodwill was assigned to our More Personal Computing segment. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of ZeniMax. None of the goodwill is expected to be deductible for income tax purposes.

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Following are details of the purchase price allocated to the intangible assets acquired:

(In millions, except average life)	Amount		Weighted Average Life


Technology-based	$	1,341		4 years
Marketing-related		627		11 years


Total	$	1,968		6 years

Activision Blizzard, Inc.

On January 18, 2022, we entered into a definitive agreement to acquire Activision Blizzard, Inc. (“Activision Blizzard”) for $95.00 per share in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash. Activision Blizzard is a leader in game development and an interactive entertainment content publisher. The acquisition will accelerate the growth in our gaming business across mobile, PC, console, and cloud and will provide building blocks for the metaverse. We expect this acquisition to close in fiscal year 2023, subject to approval by Activision Blizzard’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions.

NOTE 8 — GOODWILL

Changes in the carrying amount of goodwill were as follows:

(In millions)	June 30, 2021		Acquisitions			Other			March 31, 2022


Productivity and Business Processes	$	24,317	$	599		$	(9	)	$	24,907
Intelligent Cloud		13,256		16,879	^(a)		83			30,218
More Personal Computing		12,138		224			(116	)		12,246


Total	$	49,711	$	17,702		$	(42	)	$	67,371

(a)	Includes goodwill of $16.3 billion related to Nuance. See Note 7 – Business Combinations for further information .

The measurement periods for the valuation of assets acquired and liabilities assumed end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the table above. Also included in “Other” are business dispositions and transfers between segments due to reorganizations, as applicable.

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NOTE 9 — INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:

(In millions)	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount


	March 31, 2022								June 30, 2021

Technology-based	$	11,570		$	(7,346	)	$	4,224	$	9,779	$	(7,007	)	$	2,772
Customer-related		7,578			(3,366	)		4,212		4,958		(2,859	)		2,099
Marketing-related		5,033			(2,131	)		2,902		4,792		(1,878	)		2,914
Contract-based		343			(333	)		10		446		(431	)		15


Total	$	24,524	^(a)	$	(13,176	)	$	11,348	$	19,975	$	(12,175	)	$	7,800

(a)	Includes intangible assets of $4.3 billion related to Nuance. See Note 7 – Business Combinations for further information.

Intangible assets amortization expense was $502 million and $1.4 billion for the three and nine months ended March 31, 2022, respectively, and $405 million and $ 1.2 billion for the three and nine months ended March 31, 2021, respectively.

The following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2022:

(In millions)


Year Ending June 30,

2022 (excluding the nine months ended March 31, 2022)	$	618
2023		2,579
2024		2,275
2025		1,551
2026		1,110
Thereafter		3,215


Total	$	11,348

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NOTE 10 — DEBT

The components of debt were as follows:

(In millions, issuance by calendar year)	Maturities (calendar year)				Stated Interest Rate				Effective Interest Rate			March 31, 2022			June 30, 2021


2009 issuance of $3.8 billion ^(a)				2039				5.20%			5.24%	$	520		$	520
2010 issuance of $4.8 billion ^(a)				2040				4.50%			4.57%		486			486
2011 issuance of $2.3 billion ^(a)				2041				5.30%			5.36%		718			718
2012 issuance of $2.3 billion ^(a)		2022	–	2042		2.13%	–	3.50%	2.24%	–	3.57%		1,204			1,204
2013 issuance of $5.2 billion ^(a)		2023	–	2043		2.38%	–	4.88%	2.47%	–	4.92%		2,814			2,814
2013 issuance of €4.1 billion		2028	–	2033		2.63%	–	3.13%	2.69%	–	3.22%		2,559			4,803
2015 issuance of $23.8 billion ^(a)		2022	–	2055		2.65%	–	4.75%	2.72%	–	4.78%		10,805			12,305
2016 issuance of $19.8 billion ^(a)		2023	–	2056		2.00%	–	3.95%	2.10%	–	4.03%		9,430			12,180
2017 issuance of $17.0 billion ^(a)		2024	–	2057		2.88%	–	4.50%	3.04%	–	4.53%		8,945			10,695
2020 issuance of $10.0 billion ^(a)		2050	–	2060		2.53%	–	2.68%	2.53%	–	2.68%		10,000			10,000
2021 issuance of $8.2 billion ^(a)		2052	–	2062		2.92%	–	3.04%	2.92%	–	3.04%		8,185			8,185


Total face value													55,666			63,910
Unamortized discount and issuance costs													(481	)		(511	)
Hedge fair value adjustments ^(b)													(43	)		40
Premium on debt exchange ^(a)													(5,216	)		(5,293	)


Total debt													49,926			58,146
Current portion of long-term debt													(1,749	)		(8,072	)


Long-term debt												$	48,177		$	50,074

(a)	In March 2021 and June 2020, we exchanged a portion of our existing debt at a premium for cash and new debt with longer maturities. The premiums are amortized over the terms of the new debt.

(b)	Refer to Note 5 – Derivatives for further information on the interest rate swaps related to fixed-rate debt.

As of March 31, 2022 and June 30, 2021, the estimated fair value of long-term debt, including the current portion, was $55.9 billion and $ 70.0 billion, respectively. The estimated fair values are based on Level 2 inputs.

Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. Interest is paid semi-annually, except for the Euro-denominated debt, which is paid annually.

The following table outlines maturities of our long-term debt, including the current portion, as of March 31, 2022:

(In millions)


Year Ending June 30,

2022 (excluding the nine months ended March 31, 2022)	$	0
2023		2,750
2024		5,250
2025		2,250
2026		3,000
Thereafter		42,416


Total	$	55,666

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NOTE 11 — INCOME TAXES

Effective Tax Rate

Our effective tax rate was 17% and 10% for the three months ended March 31, 2022 and 2021, respectively, and 11% and 13% for the nine months ended March 31, 2022 and 2021, respectively. The increase in our effective tax rate for the three months ended March 31, 2022 compared to the prior year was primarily due to tax benefits from a decision by the India Supreme Court on withholding taxes in the case of Engineering Analysis Centre of Excellence Private Limited vs The Commissioner of Income Tax and an agreement between the U.S. and India tax authorities related to transfer pricing in fiscal year 2021, a decrease in tax benefits relating to stock-based compensation, and changes in the mix of our income before income taxes between the U.S. and foreign countries. The decrease in our effective tax rate for the nine months ended March 31, 2022 compared to the prior year was primarily due to a $3.3 billion net income tax benefit in the first quarter of fiscal year 2022 related to the transfer of intangible properties, offset in part by tax benefits from the India Supreme Court decision on withholding taxes and an agreement between the U.S. and India tax authorities related to transfer pricing in fiscal year 2021, and changes in the mix of our income before income taxes between the U.S. and foreign countries.

We have historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. In March 2021, the India Supreme Court ruled favorably for companies in 86 separate appeals, some dating back to 2012, holding that software sales are not subject to India withholding taxes. Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes. Therefore, we recorded a net income tax benefit of $620 million in the third quarter of fiscal year 2021 to reflect the results of the India Supreme Court decision impacting fiscal year 1996 through fiscal year 2016 .

In the first quarter of fiscal year 2022, we transferred certain intangible properties from our Puerto Rico subsidiary to the U.S. The transfer of intangible properties resulted in a $3.3 billion net income tax benefit in the first quarter of fiscal year 2022, as the value of future U.S. tax deductions exceeds the current tax liability from the U.S. global intangible low-taxed income tax.

Our effective tax rate was lower than the U.S. federal statutory rate for the three and nine months ended March 31, 2022, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations center in Ireland, tax benefits relating to stock-based compensation, and for the nine months ended March 31, 2022, the net income tax benefit related to the transfer of intangible properties.

Uncertain Tax Positions

As of March 31, 2022 and June 30, 2021, unrecognized tax benefits and other income tax liabilities were $ 16.7 billion and $15.9 billion, respectively, and are included in long-term income taxes in our consolidated balance sheets.

We settled a portion of the Internal Revenue Service (“IRS”) audit for tax years 2004 to 2006 in fiscal year 2011. In February 2012, the IRS withdrew its 2011 Revenue Agents Report related to unresolved issues for tax years 2004 to 2006 and reopened the audit phase of the examination. We also settled a portion of the IRS audit for tax years 2007 to 2009 in fiscal year 2016, and a portion of the IRS audit for tax years 2010 to 2013 in fiscal year 2018. In the second quarter of fiscal year 2021, we settled an additional portion of the IRS audits for tax years 2004 to 2013 and made a payment of $1.7 billion, including tax and interest. We remain under audit for tax years 2004 to 2017.

As of March 31, 2022, the primary unresolved issues for the IRS audits relate to transfer pricing, which could have a material impact in our consolidated financial statements when the matters are resolved. We believe our allowances for income tax contingencies are adequate. We have not received a proposed assessment for the unresolved key transfer pricing issues and do not expect a final resolution of these issues in the next 12 months. Based on the information currently available, we do not anticipate a significant increase or decrease to our tax contingencies for these issues within the next 12 months.

We are subject to income tax in many jurisdictions outside the U.S. Our operations in certain jurisdictions remain subject to examination for tax years 1996 to 2021, some of which are currently under audit by local tax authorities. The resolution of each of these audits is not expected to be material to our consolidated financial statements.

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NOTE 12 — UNEARNED REVENUE

Unearned revenue by segment was as follows:

(In millions)


	March 31, 2022		June 30, 2021

Productivity and Business Processes	$	18,578	$	22,120
Intelligent Cloud		14,524		17,710
More Personal Computing		3,694		4,311


Total	$	36,796	$	44,141

Changes in unearned revenue were as follows:

(In millions)


Nine Months Ended March 31, 2022

Balance, beginning of period	$	44,141
Deferral of revenue		70,939
Recognition of unearned revenue		(78,284	)


Balance, end of period	$	36,796

Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $160 billion as of March 31, 2022, of which $155 billion is related to the commercial portion of revenue. We expect to recognize approximately 50% of this revenue over the next 12 months and the remainder thereafter.

NOTE 13 — LEASES

We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. Our leases have remaining lease terms of 1 year to 19 years, some of which include options to extend the leases for up to 5 years , and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:

(In millions)		Three Months Ended March 31,				Nine Months Ended March 31,


		2022		2021		2022		2021

Operating lease cost	$	744	$	553	$	1,801	$	1,554


Finance lease cost:
Amortization of right-of-use assets	$	289	$	211	$	779	$	666
Interest on lease liabilities		109		100		320		286


Total finance lease cost	$	398	$	311	$	1,099	$	952

PART I

Item 1

Supplemental cash flow information related to leases was as follows:

(In millions)	Three Months Ended March 31,					Nine Months Ended March 31,


		2022		2021		2022		2021

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	726	$	533	$	1,733	$	1,506
Operating cash flows from finance leases		109		100		320		286
Financing cash flows from finance leases